What’s strategic innovation? Is strategy the same as innovation or innovation should be part of strategy? People ask this questions all the time. Strategy is a company's game plan for winning, either by competing on scale, speed or special relationships. Strategic innovation is a company’s game plan to win by changing the game and to become the winner of future’s opportunity space. Sometimes it is a simply necessity for reason of survival when discontinuities accelerate.
Is strategic innovation the same as business model innovation’? Many are confused about these questions. Strategy needs innovation to power it up but often it doesn’t include innovation. When an innovation is strategic, it means a new product/service/process that create new customer value and change the economics or the market power of the business.
The pressure for strategic innovation has never been greater. Today there are few clear boundaries separating industries from each other or one region from another, so new competitors emerge from unexpected places. Sony finds itself competing with Apple one day, Amazon the next, HP the third.
The challenge for businesses is to constantly re-define itself, its industries, its products, its services and its customers so that when competitors rush into its space, the business has moved on to the next emerging opportunity space. The constant shift is causing many businesses to quickly becoming irrelevant. They often miss great opportunities either due to failure to recognize early patterns or in the lag time between identifying the opportunity and taking action. Large organizations are slow to bring innovation idea to markets are often due to organizational barriers.
Strategic innovation is a practice applied empathy and imagination to create future business opportunities. It is about futurizing your business. "Future" is a conceptual tool, "future" is what we create! There are four components of strategy innovation,
Develop Industry (and Technology) Foresight: Which changes happen in the Industry, are the value chains being reorganized (vertical or horizontal), should we redefine our business concept.
Develop Deep Customer Insight: Which values, feelings and attitudes amongst our end users are important? Which unmet/unarticulated needs can we identify? - Remember, in most industries you can't just ask the end user - it requires psychological understanding and ability to interpret... - Here, user-centered methods are needed.
Develop New Value Propositions: This is the most important question and if you are not clear about this. We have a very serious problem. I cannot stress enough how importance of a Unique Value Proposition (UVP), which is one of the most essential elements of a business strategy. A UVP is a succinct statement of the uniqueness of a business that sets it apart from all competitors. Without a UVP, a company risks becoming lost in a sea of similar businesses. The UVP will then be translating into a Unique Selling Proposition (USP) which drives marketing activities.
Develop New Capabilities: These are the new skills and knowledge enables a company to deliver unique value to customers. It embodies an organization's collective strengths, particularly of how to coordinate activities and integrate multiple technologies.
Refine or Develop New Business Model: This is the economic engine of your organization and it consists of a set of complex system relationships between different players along the value chain. Creative combination of your participation in different part of the value chain determines your market power, competitive advantages and profitability.